China media: Yuan weakness no cause for alarm

ChinaBureau

BEIJING -(MarketWatch)- Investors shouldn't worry too much about the recent weakness in the Chinese yuan, as the long term outlook is set to improve, the Economic Information Daily said Tuesday in a commentary.

The newspaper noted that the yuan slid against the U.S. dollar late Monday, after hitting its weakest permitted level during the trading day for a fourth straight session.

The commentary said that the yuan's weakness was caused by several factors including an outflow of "hot money" from China's overheated real estate sector which is now undergoing a cooling-off period. The currency's softness is also a reflection of China's smaller trade surplus and balance of payments as a percentage of its gross domestic product--a trend that signals a rebalancing of the economy.

The newspaper, which is run by the official Xinhua News Agency, also said that it is now a good opportunity for Beijing to make the yuan's exchange rate regime more flexible.

Many economists have said that the yuan is too often seen as a "one-way bet" with the currency expected to appreciate steadily.

Some economists maintain that the yuan now has less room to appreciate, and that trading is likely to see fluctuations that can take the currency lower as well as higher.

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